1. Preparing for Health Reform: The Role of the Health Insurance Exchange
Bob Carey
RLCarey Consulting
March 11, 2010

2. Agenda Level setting Developing a baseline Types of Exchanges
Funding and operating an Exchange
Subsidizing health insurance
Importance of outreach and enrollment
Mitigating risk of adverse selection
Conclusions/Recommendations

3. Level Setting State-based exchanges
Federal guidance, but state flexibility
Oversight/enforcement handled (initially) by the states

4. Developing a Baseline Uninsured
Current publicly-subsidized health coverage programs
Insured

5. Uninsured Size of the population Demographics
Geographic/regional variations
Family income
Employment status and ESI availability
Eligibility for publicly-subsidized health coverage programs

6. Public Health Coverage Programs
Types of programs available
Eligibility criteria
Take-up rates
Distribution methods
Capacity
Potential impact of Exchange on existing programs
Particular focus on premium subsidy programs for “non-traditional” groups

7. Insured Demographics Geographic/regional variations Employment status
Types of coverage
Distribution methods
Carriers and market share
ESI premiums and % paid by employees
Take up rate of ESI
Role of brokers/intermediaries, by market segment

8. Why the Baseline?
Identify potential for program consolidation or elimination
Highlight areas to focus “crowd out” efforts
Leverage existing infrastructure
Optimize capacity and avoid duplication
Inform outreach and marketing strategy

9. What Type of Exchange? Three basic models
Market Organizer and Distribution Channel
Utah Model
Selective Contracting Agent
Massachusetts Model
Active Purchaser
1990s HIPC Model
Weak
(Range of government involvement in commercial market)
Strong
Ultimate Goal – shift the individual and small group markets from competition based on avoiding risk into competition based on price and quality.

10. Market Organizer & Distribution Channel
Sets standards of quality and soundness for insurers’ participation
Offers all plans and all carriers that satisfy quality and soundness criteria
Serves as impartial source of information
Facilitates plan/carrier comparisons
Streamlines administration and simplifies enrollment
Brokers insurance

11. Selective Contracting Agent
Offers “structured choice” of health plans and carriers
Promotes competition among insurers, but does not “negotiate” premiums
Serves as impartial source of information
Facilitates plan/carrier comparisons
Streamlines administration and simplifies enrollment
Brokers insurance

12. Active Purchaser
Sets benefits package and procures health insurance on behalf of enrollees
Negotiates premiums with carriers
Limits choice of plans/carriers
Attempts to act like large employer
Viability contingent on covering large – and “risk neutral” or better – pool of members

13. Funding and Operating an Exchange
Model selected will impact:
Roles and responsibilities
Administrative structure/governance
Staffing
Resource needs affected by model selected AND capabilities of existing public and private entities

14. Building or Renting Administrative Capacity
Medicaid agency to process eligibility for premium subsidy?
Private sector intermediaries (third party administrators) to provide administrative services?
Quoting
Enrollment
Customer service
Premium billing, collection, remittance
Account management, etc…

15. Revenues to Support Operations
Retention of a portion of the premiums
Typically 3% - 5% of premium
Add-on fee to premiums
Annual Appropriation

16. Subsidizing Health Insurance
Two main options
Stand-alone Medicaid-like health coverage
Commonwealth Care
Texas’ CHIP and Medicaid Buy-In programs
Premium subsidies for commercial insurance
Maryland’s Health Insurance Partnership
Insure Oklahoma

17. Outreach and Enrollment
O&E efforts will likely determine success and sustainability of the Exchange
Will impact risk selection and potential for administrative efficiencies
Use of health insurance brokers may be key, particularly for small group market
Need to leverage multiple sources of information to reach consumers

18. Mitigating Risk of Adverse Selection
Learn from past mistakes
Need to attract large risk pool
Exchange as sole source distribution channel for SG/NG?
If not, rating rules and underwriting guidelines must be comparable inside and outside of Exchange
Brokers have significant influence

19. Conclusions/Recommendations
“First do no harm”
Each market – and each state – is different
Need for consumer information that is understandable, meaningful and actionable
Leverage existing infrastructure
Focus on end goal – shifting competition from one based on avoiding risk into one based on price and quality

20. Questions?

21. Contact SCI for Technical Assistance: